Data related to the inventories of Copper Medical Supply is presented below: Sur

Question

Data related to the inventories of Copper Medical Supply is presented below: Surgical Equipment Surgical Supplies Rehab Equipment Rehab Supplies Selling Price 260 120 340 165 Cost 170 90 250 162 Replacement 240 80 235 158 Disposal Cost 30 5 25 10 Normal gross profit ratio 30% 30% 30% 20% In applying the LCM rule, the inventory of rehab supplies for Cooper Medical Supply would be valued at: Data related to the inventories of Copper Medical Supply is presented below: Surgical Equipment Surgical Supplies Rehab Equipment Rehab Supplies Selling Price 260 120 340 165 Cost 170 90 250 162 Replacement 240 80 235 158 Disposal Cost 30 5 25 10 Normal gross profit ratio 30% 30% 30% 20% In applying the LCM rule, the inventory of rehab supplies for Cooper Medical Supply would be valued at:

Explanation / Answer

Upper limit = NRV = (165-10) = 155 Lower limit = (NRV-Normal profit) = (155- (20% of 165) = 122 As per the LCM rule, Replacement cost of 158 does not lies within the LCM limits Hence, the inventory of rehab supplies for Cooper Medical Supply would be valued at 122 which is the lowest value

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